Still Going Up
The Dow Jones Industrials are up 3%, the S&P 500 is up 5%+, and the NASDAQ 100 is up 8%+ since our last post in mid April. So much for fears of the Fed raising rates; so much for concerns about an expansive Russia; and so much for oil field takeovers in Iraq and Syria. Nothing seems to be able to stem the flow of capital into stock markets. Even emerging markets are up over 8% after an extended period of under performance.
The social media stocks and other momentum names are still trading well beneath their highs of earlier in the year. This is probably a good sign in that the broader market seems to be lifting as the U.S. economy chugs along as opposed to chasing momentum.
There have been only two market pullbacks of note since the beginning of the year, one in late January and the other, much shallower, in early April. Now the underinvested, who had been expecting a deeper correction, are worried about being left out of rallies and the pullbacks, like the one last week, are bought quickly.
So, as has been the case, with almost invisible bond yields, institutional investors not fearful of global political or economic disruptions, and an economy that has not stalled out, stocks (including some takeover candidates) are still the investment of choice for these large investors.
It’s especially hard to find bargains in good stocks now although there are still a few solid dividend paying large caps that don’t seem extended in price, for those still feeling underinvested. Stops are still a good idea. We are all going to be all the way in the pool at some point.